Justice Dept. Charges FedEx For Online Drug Shipments

A federal grand jury indicted FedEx last week on charges the company knowingly shipped drugs from illegal online pharmacies. NPR's Yuki Noguchi reports the disputes over shippers' responsibilities in the illegal drug trade go back many years.

YUKI NOGUCHI, BYLINE: The indictment says a decade ago, law enforcement told FedEx that illegal online drug sellers were using their services to supply dealers and addicts. Instead of shutting it down, the Justice Department says FedEx established work-arounds that enabled it to protect revenues, and sales commissions earned from the illegal shipments. FedEx vehemently denied the charges. We will plead not guilty, the company said in a statement. We will defend against this attack on the integrity and good name of a FedEx and its employees. This is not the first tangle between law enforcement and private shippers. Last year, UPS paid a $40 million fine to settle similar charges. John Walters is familiar with the cat and mouse game around illegal prescription drugs.

JOHN WALTERS: I was director of drug control policy during the George W. Bush administration.

NOGUCHI: He says prescription drugs are relatively easy to ship next day delivery.

WALTERS: It's not new. People have used shipping services in the past. And they're an obvious way of trying to move drugs internal to the country and even in some cases, internationally.

NOGUCHI: Interestingly, though, Walters says FedEx had started to crack down on the problem.

WALTERS: They had hired former senior DEA officials that had retired as security people. My experience, they were the most cooperative of all companies when I was in office. So I'm a little surprised by this.

NOGUCHI: John Caulkins studies the illegal drug market and is a public policy professor at Carnegie Mellon University. He says there are practical challenges to controlling shipments of prescription drugs. First, by weight and volume, drugs make up a tiny proportion of what a company like FedEx ships. And, Caulkins says, FedEx lacks investigative authority. It depends on what it learns from law enforcement. And in this case, FedEx says in a statement it has not been provided a list of illegal pharmacies.

JOHN CAULKINS: FedEx doesn't have an independent ability to determine which of those companies are real companies and which are illegal organizations pretending to be real companies.

NOGUCHI: Keith Schoonmaker is an analyst with Morningstar. He says even if FedEx loses its case and has to pay the maximum fine of $1.6 billion, the financial impact will be small. And, Schoonmaker says, there's no financial reason for the company to try to protect the revenue it receives from illegal online pharmacies.

KEITH SCHOONMAKER: They're not going to put their brand in jeopardy over a small amount of revenue from a non-reputable shipper.

NOGUCHI: FedEx has been summoned to appear in court later this month. Yuki Noguchi, NPR News, Washington. Transcript provided by NPR, Copyright NPR.